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Econ Videos 79 videos

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Econ: What is Personal Consumption Expenditure? 3 Views


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Description:

What is Personal Consumption Expenditure? Personal Consumption Expenditure looks at the goods and services American consumers pay for and any changes to the prices of these things. It directly measures how much consumers spend on personal products and services.

Language:
English Language

Transcript

00:00

And finance Allah shmoop What is personal consumption expenditure Well

00:08

consumer spending makes up a big part of the U

00:10

S economy an estimated two thirds of it to be

00:13

exact Tracking consumer spending is a key to tracking the

00:16

overall economy Will the personal consumption expenditure is the formal

00:20

way to measure consumer spending Right So first what is

00:24

it consumer spending Example you work at Smooshy Love No

00:32

not that kind of company It's a company that makes

00:34

heart shaped pillows people by the pillows for you know

00:37

birthdays and Valentine's Day as a reward for getting their

00:40

annual cardiovascular checkups You know stuff like that All the

00:44

money spent on the pillows pays your salary Customers pace

00:47

mushy love for the pillows Smoochy Love gives some of

00:50

that money to you in the form of a paycheck

00:53

Then your paycheck allows you to buy a host of

00:56

other consumer goods You buy food and gas and clothes

00:59

and electronic toothbrushes and Christmas tree shaped pillows for holiday

01:04

gifts and or Arbor Day decorations You know stuff like

01:07

that Some of the money you spend on this stuff

01:08

eventually goes toe workers at the companies who make those

01:11

products These workers then spend that cash on other stuff

01:15

and so on It's the economic circle of life all

01:18

right well that consumer spending cycle is what represents two

01:21

thirds of the economy something like nine trillion dollars a

01:25

year So the spending on consumer goods is crucial Economists

01:29

and policymakers need a way to track all that spending

01:32

It allows them to see how things are going and

01:34

to make predictions about overall economic growth Enter the P

01:38

C E or personal consumption expenditure Tracker Here It's the

01:42

fancy name for all that money you spend on knickknacks

01:45

and doodads and services to like you know consumer spending

01:49

includes stuff like oil changes You get for your car

01:51

and doctor visits where you turn your head and cough

01:54

and you know a back hair Electrolysis Personal consumption expenditure

01:58

is the official stat for measuring consumer spending Any economy

02:02

in the US The figure is compiled monthly by the

02:05

Department of Commerce Will the same report also includes details

02:08

on personal income and disposable personal income Two measures of

02:12

you know how much money people make right So the

02:14

government looks at how much smooshy love is paying you

02:17

and how much of that money your spending while the

02:20

PC also helps to track changes in price's Along with

02:23

the income and spending data the government issues what's called

02:26

the P C E price index It shows how much

02:29

prices for consumer goods have changed during that period Well

02:32

the index measures retail inflation basically or deflation of prices

02:37

go down smooshy love overproduced heart pillows ahead of Valentine's

02:41

Day Now it's March and they've got a warehouse full

02:44

of them Then they drop prices Just a blowout inventory

02:47

Well that drop in prices would show up in the

02:49

PC price index It's mushy Love is now facing lower

02:53

revenue for this month Own theory Maybe they cut your

02:56

salary which then shows up in the government report in

02:58

the personal income section Now you have less money to

03:01

buy other goods and you spend less on clothes and

03:04

back hair electrolysis and well that lower spending shows up

03:08

in the PC east at the Now We gotta go

03:10

find someone else to tweeze are back hair with a 00:03:12.688 --> [endTime] discount Get out

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